Research Methods 2009-10

Faculty of Business & Law

Research Methods
Assignment

2009/10

Student
Name: Gurpreet Singh Vedi

Student I.D

Session
2009 – 10
Course Semester 2nd
MSc Finance
Module Tutor

E-mail
address

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Research Methods 2009-10

TABLE OF CONTENTS
PAGE NO.

Authors
Citation..............................................................................................
3

Outline of
Articles........................................................................................... 3

Aims &
Objectives...........................................................................................
3

AN EXPLORATORY STUDY OFOPERATIONAL

REASONS TO BUDGET

AUTHORS CITATION

Outline of the article

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Research Methods 2009-10

From the article we could outline that budget is considered as the root key of
any organisation and is also regarded as the important step in planning and
controlling of organisations but on the other hand, it is still critised for many
reasons by practitioners and academics. Despite this, studies have shown
that the 92%of surveyed firms still use a budget which raises the question of
their continued use by the organizations. The study done in the article also
examines the importance of 10 possible operational reasons to budget in
organizations, encompassing planning, control and evaluation. The results
seen from the survey of 331 accountants in medium to large organizations
indicates that planning and control reasons are regarded as more important,
followed by a discussion of the 10 operational budget reasons considered in
this study than evaluation reasons for budgets. An analysis on the
relationship between rolling forecasts and annual budgets was done which
showed that, rolling forecasts seem to be used as complements to (not
substitutes for) the annual budget. Different Planning reasons, Evaluation
reasons, Budget criticisms and Rolling forecasts realated to budgets are
explained in the article studied complimentary with the research methods
adopted. The cross-sectional survey was sent to 2400 respondents randomly
selected from the CPA Australia membership.

Aims & Objectives

The authors aimed, that despite of the strong criticism, there is a use of
budgets in the majority of organisations. They also wanted to show that
rolling forecasts are either substitute or complimentary source of budget by
acquiring different survey methods and taking appropriate samples with
desired sample size.

The objectives of the authors are discussed as follows:-

1. To show that there is a greater importance of budgeting for major

planning and control reasons, in any organization?

2. To conclude that planning and control budget reasons will be more

important for rolling forecasts than annual budgets and relates,
whether rolling forecasts complement the annual budget or not?

CRITICAL REVIEW OF THE ARTICLE

The critical evaluation of the article has been done by wisely reading the
article and evaluating the key points involved in each section of the article.

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Research Methods 2009-10

Abstract

An abstract plays a significant role to determine weather it is relevant

reading and evaluating an article or not. A relevant article is one which
provides easy information about the article in a readable manner without any
confusing language, making a reader comfortable in understanding the
meaning and methodology of the article and connecting it to the conclusion.

Introduction
In the introduction the author clearly emphasise on the raised criticism in the
use of budget but still discuss the 2 possible reasons for its increase use in
the maximum organisations. The authors knew the reason for the criticism of
the budget i.e. because of its evaluation reason but on the other hand they
discuss the use of annual budget in planning and controlling the organisation.

The authors also states that rolling forecasts are argued by practitioners to
be a substitute for the annual budget, as it involves more frequent
forecasting by companies in order to generate more accurate financial
predictions, which helps in overcoming many of the problems claimed for
annual budgets, which have been the focus of critique. To the argument
above, the use of improved budgeting practices were also explained, for
which budgeting persists despite of the significant criticisms in the literature.

But as every article has some limitations, this article too has, as the authors
failed to cleary explain the relationship between the rolling forecasts and
budget and the appropriate reason for the criticism on budget.

The survey of 331 accountants in medium to large organizations was also

done to indicate that planning and control reasons are regarded as more
important than
evaluation reasons for budgets and in addition to the above, annual budgets
and rolling forecasts are also used for nearly identical reasons, which seems
to be surprising, as it was expected that the two budget forms would be
used for differing purposes, which is not clearly stated by the authors.

Some tables are shown by the authors in contrary to the surveys done, which
are as follows:-

1. Depicting the descriptive statistics for budget reason.

2. Comparison of means: Planning/control versus staff evaluation

reasons.

3. Comparison of means: Planning/control versus business unit

evaluation reasons.

4. Comparing means: Annual budget and rolling forecast).

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Research Methods 2009-10

5. Frequency of rolling forecast users among sub samples.

These all tables directly or indirectly depicts that the planning and control
budget reasons may be regarded as most important as evaluation budget
reasons. It is also statistically stated that all 10 budget reasons are important
for both the annual budget and rolling forecasts and the three most
important budget reasons for both annual budgets and rolling forecasts are
’control costs’, ‘board of director monitoring’ and ‘formulation of action
plans’. For the concluding the tables, some prepositions were also set by the
authors, so that one could easily understand the purpose of setting up the
tables.

Rest the author have given all the research work under proper headings so
that understanding the article in a one way could be made and the reader
could smoothly come to the summary and conclusion of the article. The
tables given in the article too add curiosity to the reader and help the reader
to observe and compare the data by its own self.

Methodology

Under this section of the article authors discusses the method used for the
survey.
The study used bye the authors is a cross-sectional mailed survey of senior
management accountants with a CPA qualification. According to the article
the CPA Australia professional accounting body is one of the two largest
accounting bodies in Australia, and comprises approximately 110 000
members around the world, across 92 countries.

The cross-sectional survey was sent to 2400 respondents randomly selected

from the CPA Australia membership .The purpose of taking senior
management accountants with CPA qualification for studying budgeting was
deemed appropriate, as to explore the rolling forecast propositions, large
sample was needed to ensure a reasonable number of responses from both
annual budget and rolling forecast users for statistical analysis.

The sample selected from the CPA Australia membership database comprised
members with senior managerial job titles (finance manager, chief financial
officer and financial controller), employed in medium and large
organizations4 or strategic business units of larger organizations. Only one
member was surveyed from any one organization/strategic business unit.